As we welcome the new year we thought it appropriate to give a round-up of the trends we observed in 2019, how we expect them to pan out in 2020, and how they will affect a mining company’s manner of communications with its shareholders, analysts, and media.
ESG has been a buzzword for years but in 2019 it picked up momentum. This is partially due to the Brumadinho tragedy that galvanised the Church of England and several other investors (representing over £5 trillion of funds) into action to ensure this type of catastrophe never happens again. We also saw the World Gold Council announce its Responsible Principles, supply chains became the focus of many news articles, and of course Extinction Rebellion had the mining industry as a major target. Mining companies have one of the worst reputations yet overall they are arguably one of the best corporate citizens. The issue is not communicating enough and appropriately. In 2020 this must change. Not only does the level of disclosure need to increase but miners must report within a widely-accepted ESG framework that is aligned with their investors. Otherwise, they will no longer be able to access the global capital markets, which are increasingly investing with an ESG mandate (about half of all investment industry assets – US$40 trillion – in this year alone will fall in this category). In response, Buchanan has formed an ESG team, which includes several members of the Buchanan mining team, to help companies navigate today’s ESG landscape and communicate in a way that resonates with their stakeholders. We are hosting a panel on this topic during Mining Indaba.
In 2019 several Canadian and Australian companies eyed the London Stock Exchange (LSE) for dual listings. This, of course, makes sense as the LSE is a natural fit with its deep pools of capital, high liquidity, sophisticated and long-term investors, principles-based approach to capital, and investors who continue to want to invest in the mining sector. That said, most companies which have listed in the UK have not raised capital – this begs the question: Why not? To maximise a dual listing and the available liquidity in the UK, mining companies must not only tick the right boxes but keep in mind what UK investors require as far as communications needs are concerned.
With Goldcorp and Newmont as well as Barrick and Randgold merging in early 2019, there were big expectations that there would be several rounds of non-core-asset divestments and spin-offs with consolidation at the mid-tier level too. It took several months for this to take place but it all came fast and furious – Resolute/Toro, Kirkland/Detour, Equinox/Leagold, and Zijin/ Continental to name a few. This brought some new energy and excitement to the industry but M&A doesn’t have the same ring to it as it used to because mining investors still recall the lack of value the M&A frenzy of the ‘noughties’. This means mining companies that are doing the acquiring must be very explicit in how they expect value to be formed yet conservative with their valuations. And for those being taken over, they must have an explanation of why they are accepting a low premium (which seems to be the new normal).
We expect 2020 to be just as (or possibly even more) volatile than 2019 but as we get ready for Mining Indaba we see more opportunities than challenges for the sector and are looking forward to seeing what the year has in store for the industry.
Will you be attending Indaba? If so, we are available for meetings 3-6 February and would be thrilled for you to attend the Diggers vs Dealers cricket match (Sunday 2 February) and/or ESG in Mining panel (Monday 3 February). Before heading down to Indaba, we are organising site visits for Tharisa, Pan African Resources and Petra Diamonds. You can find more information by emailing [email protected]